The requirements and processes applicable to employers handling garnishments are primarily governed by state laws. Therefore, in addition to the federal Consumer Credit Protection Act (CCPA), multistate employers need to be aware of the garnishment requirements in all states. As if these issues are not enough, complicating it further for employer compliance initiatives is the fact that state legislatures frequently tweak garnishment requirements and processes. During the past several months, six states have made noteworthy changes to their garnishment laws and two states made major changes. This two part-series covers the changes to the garnishment laws in Michigan, Georgia, Tennessee, California, South Dakota, and West Virginia.
Michigan’s Garnishment Laws
The Michigan legislature adopted an employer-friendly amendment that streamlined processing, increased employer fees, and decreased the default judgment risks arising when a garnishment is mishandled. Some of the highlights of these important changes are:
- A $35 (instead of a $6) fee must be paid to the garnishee.
- Garnishment will continue until the balance of a judgment identified in the verified statement supporting a garnishment is satisfied in full (instead of ending after six months).
- Garnishment must be properly served or it is invalid. (instead of previously allowed store or plant-level delivery.)
- Every six months, a plaintiff is required to provide a balance statement to the garnishee and judgment defendant.
- A plaintiff is required to provide the employer/garnishee and judgment debtor a release of garnishment within 21 days of satisfaction of the judgment (including all costs and interest).
- A new multistep notification process stands in the way of creditors obtaining default judgments against employers.
- A new complete defense to employer/garnishee liability has been added to protect employers when the garnishment and/or notice of failure are not properly served or the employer owes the debtor no funds.
- A provision has been added limiting liability for garnishees to 56 days of proper withholding when the garnishee files a motion within 21 days after a default judgment.
- A provision was added to the Michigan Wages and Fringe Benefits Act allowing employers to deduct from the employee’s wages without the necessity of obtaining voluntary written consent any amounts that the employer had to pay due to mishandling the garnishment.
Georgia’s Garnishment Law
Georgia has been in the news frequently in the past several years. First, the Supreme Court of Georgia ruled that answering a garnishment was “the practice of law” and was only to be performed by a licensed attorney. This decision was overturned by legislation soon thereafter. Then, in September of 2015 the U.S. District Court for the Northern District of Georgia held that the Georgia garnishment statute was unconstitutional. This caused great confusion, especially with employers. A month later, the court amended its order to state that continuing garnishments for wages were not impacted by this ruling.
Since all other forms of garnishment (e.g., to financial institutions) were subject to the stay, the Georgia legislature introduced an amendment. This amendment completely revised the garnishment statute for everyone involved—including those continuing garnishments for wages. On March 24, 2016 the Georgia legislature passed Senate Bill 255, which was signed into law by the governor on April 12, 2016. The bill, now Georgia Laws Act 325 of 2016, went into effect on May 12, 2016.
Many of the changes are mere rewordings and renumberings. A few of the changes worth noting are the following:
Types of Earnings
Several specific types of earnings—for instance, severance payments, tips, and overtime compensation—were added to the list of what is subject to garnishment. This change will have little impact since severance payments and overtime compensation were previously presumed to be included and tips are presumed excluded due to the U.S. Department of Labor’s Wage and Hour Division view that tips (not including any amount paid to employees as a tip credit) are not earnings.
The statute added a whole new category that many may not have previously considered when calculating garnishments—deferred compensation in an unfunded employer plan. The statute does not address how this change will be implemented. Employers should consider these funds subject to garnishment in Georgia and analyze how to respond.
The changes create statewide uniformity in processes and forms used in all Georgia courts. A practical impact of this effort is that the practice of one magistrate court, requiring submission of withheld funds contemporaneously with the answer, has been written into the statute and now clearly applies to all Georgia garnishments.
Misspellings and Incorrect Forms
According to the amendment, a garnishment is not valid if the surname of a defendant is misspelled or a plaintiff uses the wrong form (e.g., a form for garnishment of a financial institution).
A focus of the amendment is the creation of forms and processes for defendants to use to challenge garnishments and/or claim exemptions. These will not have an impact on employers since they must still answer, withhold, and remit, even after a challenge is filed. If the challenge is successful, the court will provide an order to the employer.
Lastly, under the unrevised law, if a default judgment was entered for mishandling, the employer had 60 days to challenge the judgment after actual notice. Now, the employer has 90 days to challenge the judgment after service.
Part two of this two-part series will address recent clarifications to Tennessee’s wage garnishment law.